January 27, 2020 / 7:43 PM / a month ago

EMERGING MARKETS-Latam assets rattled by virus fears; Brazil's real touches near two-month low

    * Brazil's real slips on rate outlook, current account data
    * Commodity-linked currencies drop on weak prices
    * MSCI EM stocks eye worst day since Nov 2018

 (Adds details, updates prices)
    By Ambar Warrick
    Jan 27 (Reuters) - Latin American assets slid on Monday as
investors fretted over the potential economic damage of China's
coronavirus outbreak, with Brazil's real touching its weakest
level in nearly two months.
    Risk assets around the globe were sold off, with investors
fleeing to safe havens amid widespread disruptions in the
world's second-largest economy. Risk-exposed emerging markets
bore the brunt of the selling.
    Some participants also noted that markets were locking in
profits after rallying in the fourth quarter of 2019. Optimism
over a Sino-U.S. trade truce, as well as an expected recovery in
global growth had pushed up risk assets through the quarter. 
    "The outbreak of the coronavirus has turned into the
catalyst for the correction in risk assets," Mark McCormick,
global head of FX strategy at TD Securities wrote in a note.
    "The market takes a step back from the reflation narrative,
reflecting a mix of stretched positioning, excessive momentum,
and frothy valuations. We don't think this is a fundamental
shift but more of a technical washout." 
    Brazil's real declined about 0.5%, touching its
weakest level to the dollar since early December. Expectations
of a further reduction in the country's already record-low
interest rates- according to a central bank survey- further
pressured the currency.
    Data also showed that a steep decline in the Brazil's trade
surplus contributed to its widest current account deficit in
four years. 
    The MSCI's index of Latin American currencies
 touched its weakest level since early December,
as the dollar rose on safe-haven demand.
    Commodity-linked currencies- the Chilean peso and the
Colombian peso- tumbled as the prices of their respective
exports fell amid fears of slowing industrial demand from China.
    Copper prices fell for a ninth straight session, while oil
prices were at a three-month low.
    Mexico's peso fell despite data showing a strong
uptick in November retail sales. Stocks in the country
were set for their worst day in more than two years, dropping
about 2.3%.
    MSCI's index for Latin American stocks
tumbled more than 3% and was set for its worst session since
November 2018.
    Brazil's Bovespa index was knocked off record high
levels, shedding about 2.9%.    
    Key Latin American stock indexes and currencies at 1912 GMT:
    
    Stock indexes             Latest     Daily % change
 MSCI Emerging Markets         1102.79              -1.48
                                        
 MSCI LatAm                    2803.69              -3.11
                                        
 Brazil Bovespa              114944.93               -2.9
                                        
 Mexico IPC                   44071.07              -2.37
                                        
 Chile IPSA                    4561.47              -1.71
                                        
 Argentina MerVal             39768.56             -0.374
                                        
 Colombia COLCAP               1627.40              -1.24
                                        
                                                         
       Currencies             Latest     Daily % change
 Brazil real                    4.2043              -0.47
                                        
 Mexico peso                   18.8920              -0.54
                                        
 Chile peso                      787.6              -1.35
                                        
 Colombia peso                  3398.9              -1.06
 Peru sol                        3.331              -0.24
                                        
 Argentina peso                60.1650              -0.11
 (interbank)                            
                                        
 
    

 (Reporting by Shreyashi Sanyal and Ambar Warrick in Bengaluru;
Editing by Chizu Nomiyama and Lisa Shumaker)
  
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